Musings on Entrepreneurship and Innovation
Sunday, June 11, 2006Satisficing, Uncertainty, and Wisdom
Attempting to optimize in the face of high degrees of uncertainty is foolish and dangerous. A strategy of satisficing, with a heavy dose of humility and open-mindedness, is probably a wiser course of action.
In my personal efforts to free myself from some of the more pernicious aspects of my economics and MBA training, I've come to recognize that a) like the game of Russian roulette, life is full of asymmetric distributions, and b) avoiding catastrophic error can be the key to success. Pretty obvious, eh? In practice, it's not always obvious to those of us who sometimes confuse looking smart with being smart.
Here are some books by authors who have interesting things to say about being wise rather than merely smart:
The Logic of Failure: Recognizing and Avoiding Error in Complex Situations
The slowness of our thinking and the small amount of information we can process at any one time, our tendency to protect our sense of our competence, the limited inflow capacity of our memory, and our tendency to focus only on immediately pressing problems -- these are the simple causes of the mistakes we make in dealing with complex systems.
Language in Thought and Action
Action resulting from two-valued orientation notoriously fails to achieve its objectives...In short, the two-valued orientation increases combativeness but sharply diminishes the ability to evaluate the world accurately. When guided by it for any purpose other than fighting, we almost always achieve results opposite from those intended.
Simple Heuristics That Make Us Smart
The function of heuristics is not to be coherent. Rather, their function is to make reasonable, adaptive inferences about the real social and physical world given limited time and knowledge...when compared to some standard benchmark strategies, fast and frugal heuristics can be faster, more frugal, and more accurate at the same time.
Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-based Management
[W]isdom means "knowing what you know and knowing what you don't know," especially strike a balance between arrogance (assuming you know more than you do) and insecurity (believing you know too little to act). This enables people act on their present knowledge while doubting what they know. It means they can do things now, as well as keep learning along the way.
Why Most Things Fail: Evolution, Extinction & Economics
The potential rewards from gaining even a very partial insight into the future are substantial. But no one can rely upon this as a basis for success. Company brands fail for a whole variety of reasons. After the event, after the failure, like any good historian or social scientist, the brand manager or ad agency responsible for the account can construct a narrative to account for failure. But these stories, to give them any equally accurate but more homely description, are precisely that. We can never know for sure why a brand or even a company failed. More importantly, we can never know for sure in advance how a new product or company will perform.
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
My lesson from [famous trader George] Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it.
